Every now and again, someone asks me how to evaluate a startup they're
considering joining. They've had a couple interviews, they like the
technology, environment, and the job description, but a big question
remains: Will this company succeed?
The short answer is that it's impossible to know (who can tell whether
the CEO is going to develop a coke habit in the next year, and whether
that coke habit will hurt or help his performance?) But if I had to
name just one single thing that predicts success well, it would have
to be customers. When you're evaluating a company, the one
thing you've got to know is whether there is demand for the company's
products. What better indication is there than customers? Sure,
seeing the company's full audited financials might be better, but most
companies won't reveal that stuff to a guy applying for an engineering
job. However, most companies do seem willing to tell an applicant
some basic info about their customers.
So what do you ask? Find out how many customers the company has, how
long it took to get them, and how fast they're adding new customers.
How many potential customers are out there, anyway? If you haven't
been kicked out of the interview by now (remember, when asking these
questions, politeness counts, and do try to sound impressed with the
answers!), you might also ask how much a typical customer pays, and
how many customers it takes to get to break-even (that's where the
company isn't losing money anymore). After you get all this info, you
should be able to do a little math to see if the company is on track
to capture a sizable share of the market within a few years, and get
to break-even in the near future. The two things you want to see are
a healthy growth rate (say, on track to capture 20% of the market
within 3 years) and happy customers.
I have two more issues to cover. First, what if the company has no
customers yet? It's very hard to evaluate companies at this stage, so
try to find out anything you can about customer trials or surveys.
Any data at all helps, but mostly, it's best to know something about
the market the company plans to sell to before you dive in. And by
the way, if you join a company before it has customers, you should get
a lot of stock options.
Finally, we come to the ugliest issue of them all: what if the company
isn't completely truthful? I tend to think that most people are
mostly honest, so I don't expect outright lies (especially when it
comes to dealing with someone who might become a coworker). But some
amount of exaggeration of good news and minimization of bad news is
common, so take all this info with a grain of salt.
I admit this is just my opinion, it's not at all sure-fire, and it's probably obvious as well. But in everything I've read about interviewing, I don't recall seeing any mention of trying to assess the company's chances. And of the people I've interviewed for engineering positions, very few have bothered to ask about customers. Beyond the details, the message is this: don't just look at the technology when considering a company to join.
